Final answer:
Adam Smith, a renowned economist, formulated the invisible hand theory, which describes how self-interested actions in a free market can inadvertently lead to the collective benefit of society, though modern critiques highlight its limitations and moral concerns.
Step-by-step explanation:
The famous economist who came up with the invisible hand theory is Adam Smith. Smith, a Scottish economist and philosopher, introduced significant capitalist ideas through his seminal work, The Wealth of Nations. One of the key concepts he explored was that of the invisible hand, an unseen force that he believed maintains balance in the supply and demand of goods and services within a free market economy.
According to Smith, individuals pursuing their own self-interest inadvertently contribute to the overall economic welfare of society, as they make rational choices that lead to the production of goods and services most needed by society. Despite its profound influence on economic thought, modern scholars have critiqued Smith's ideas, pointing out that people may not always act rationally and that the invisible hand can overlook moral considerations, such as the impact on enslaved people, poor workers, and colonial subjects.